Now is always a great time to check in with yourself and your finances–whether that’s checking in with your budget, savings, or debt. Many Americans do not view money positively and about 64% count it as a significant source of stress in their life. According to the American Psychological Association, around half of adults (52%) say they have experienced negative financial impacts due to the pandemic.
If you have high-interest debt or multiple debts to pay off, you may have considered using a personal loan. Personal loans can be used for making a positive impact on your finances, such as paying off high-interest credit cards or expensive medical debt.
Personal loans may provide:
- Flexibility and breathing room in your monthly budget
- One monthly payment rather than multiple bills to worry about
- Reduce your high-interest debt through debt consolidation
To ensure you set yourself up for financial success and wellness, a personal loan can help with consolidating high-interest debt and get the ball rolling to a healthier financial life.
Here’s what you should know about utilizing personal loans to improve your financial wellness.
What exactly is a personal loan?
A personal loan is typically a form of unsecured debt that you don’t have to put up collateral, such as a car or house, to qualify.
Personal loans are offered by banks, credit unions, private lenders, and other financial institutions and need to be paid back (with interest) within the term, or the length of time the loan needs to be repaid. Terms for a personal loan can range from 24 months to 60 months, but vary depending on the lender you choose.
Pay off medical debt with a personal loan
There’s no way to predict when a financial emergency or disruptions will arise. But when it does happen, it can become a real financial stressor.
Medical bills can lead to bankruptcy. Here are some eye-opening stats around medical bills:
- Nearly One in four Americans chose to skip some sort of medical care due to high costs
- The average cost for hospitalized Covid-19 patients without any health insurance was $73,300
Like other debt, medical debt means that you may have less money to spend on other essentials, such as food and housing.
A personal loan can help cover these types of unexpected stressful costs and helps you from depleting your emergency fund or personal savings.
Save on high interest
The interest rates for your personal loan, if lower than those of your credit cards, could result in less interest paid over time.
In addition, personal loans are usually on a fixed-rate term, which means the amount you have to repay won’t change over time. This is an advantage over credit cards, which can have variable APRs that could go up and down with the economy.
You can apply to use a personal loan to consolidate debt, especially if you have high-interest credit card bills on multiple cards. Personal loans for debt consolidation can help you pay off your debt quicker and potentially save you money on interest; which is something you can worry less about knowing that the loan is predictable with a fixed interest rate.
Which loan is right for you?
Before you choose a lender, shop around for the best rates. If you want to improve your financial wellness with a personal loan and pay off high-interest debt, make sure the interest rate you qualify for is lower than what you’re paying currently. Also, double check for other costs such as origination fees.
Bottom Line
Using a personal loan and creating a framework that makes your debt repayment feel more manageable helps set you up for future financial success. Set the intention to borrow with a specific purpose and get started on improving your overall financial health.
Won't affect your credit score¹